As a gym owner, you’ve likely encountered situations where members demand refunds for various reasons. The question of whether to grant a refund can be complex and fraught with legal implications. In this article, we’ll explore different scenarios that gym owners commonly face and discuss why having a well-drafted “No Refunds” policy in your membership contract is crucial for protecting your business.
Scenario 1: Contract Explicitly States “No Refunds”
You have a new member join the gym. As with every member, you have this new member sign a membership contract. This could be with paper and pen. Or, it could be online. Online signatures are as good as “wet” signatures theses days. Also, some of the better gym management softwares out there will have the member actually write their signature on the trackpad or screen. You’ve been a dutiful gym owner and you have a membership contract that clearly states “No Refunds.” However, something happens, the member decides to leave your gym, and the member STILL demands a refund.
In this case, the contract serves as a legally binding agreement between you and the member. Most members, upon reviewing the contract, will realize they have no grounds for a refund. Usually, a simple conversation with these members will resolve any questions and the gym owner will walk away with most, if not all, of the membership fees.
Scenario 2: Contracts Don’t Mention Refunds
Similar to Scenario 1 with the new member coming in and signing a membership contract. However, this time, your membership contract is silent on the issue of refunds. Sometimes, gym owners may say something to us like, “It’s just our policy that we don’t offer refunds.” Or, we will ask if the gym owner ever told the new member that the member has no right to a refund, and the gym owner can’t remember. Regardless, the bottom line is that there is no written, “No Refunds” clause.
Without a “No Refunds” clause, you’re in a vulnerable position. You cannot prove that the Member knew of any no refunds policy. Members may demand refunds, and you’ll have less legal ground to deny them.
Scenario 3: Non-Compliant Contracts
Continuing with you Scenario 1, the new member signs your membership contact AND you have a “No Refunds” policy. That’s great. However, this time, you live in a state that requires your gym to register with the state and has specific laws about what has to be in your written membership contract. Like most other gyms owners, you are unaware of these requirements, and your contract doesn’t comply with state laws governing gym contracts, making it unenforceable.
In such cases, you are walking a tight rope if you want to push back on against a member demanding a refund. A court is likely to rule in favor of the member, requiring you to issue a refund, and you may end up admitting that your gym isn’t legally compliant with state laws.
Scenario 4: No Written Contract
You don’t have a written contract with the member. Call it what you want, a contract, an agreement, payment policies, payment terms, they are all the same thing. “We don’t have contracts because we don’t believe in locking our members into a bunch of legal terms,” is a response gym owners will give me every so often.
In this Scenario, a gym owner may also say, “The member was supposed to sign something, but somehow fell through the cracks, and I can’t find a signed agreement from them.”
Without a contract, you’re at the mercy of state laws and local regulations, which often favor the consumer. Expect to give a refund in most cases.
The Importance of a “No Refunds” Policy
Having a “No Refunds” policy that is clearly stated in a legally compliant contract can protect you from 90% of refund demands. Members who read the contract will generally conclude that they have no right to a refund. You are up front and clear with the members in the beginning. You are setting the expectation from the start, “You can cancel, but you have no right to a refund.”
The Remaining 10%
For the remaining 10% of cases, it’s in your best interest to negotiate an agreement where you keep the money for the time the member used or could have used the gym, while refunding the rest. Failure to negotiate could result in chargebacks or legal action, both of which are costly and time-consuming.
A Cautionary Tale: Paid-In-Full Memberships
Offering memberships that are paid in full puts you in a vulnerable position. If such a member demands a refund, you’re at a higher risk of losing a significant amount of money. In the end, you as the gym owner have to ask yourself whether it is worth your time and money to fight to keep paid in full memberships. Alternatively, will you have less issues, less headaches, and less refund demands with shorter term agreements and clearly outlined expectations?
The key takeaway is that having a well-drafted, legally compliant contract with a “No Refunds” clause is essential for protecting your gym business. Nothing will be iron clad and oftentimes, it is best to just try to work with the member so that both parties are happy. Setting those expectations with your members in the beginning is essential. You set these expectations with your initial membership conversation followed by a written agreement that also contains all of your policies and requirements.
If you have questions about your current membership contract or need legal consultation, feel free to reach out to us for some guidance.